Fiscal elixirs far from what economy needs

There is always an "Aha!" moment in the life of a balding male. Same goes for receding economies, too--but first, the balding male part.

The evidence has been around for a long time: tufts in the hair brush, strands on the pillow, the first sunburn of the scalp.

Then the moment comes. Trying on a new suit, the mirror catches a rear view. Or a photograph captures his pale pate. "Oh, my goodness," he says, "I've got a glow dome!"

Recessions are that way.

We know they're here long before the official data tell us so. Yet, no matter how certain we are, it's still an important moment when the National Bureau of Economic Research officially declares it, as it did Monday.

The announcement also marks the precise moment of our most immediate danger. It's the time when Congress tends to rush in with a big stimulus package just as the economy is recovering on its own. The "cure" can do more damage than the problem itself.

As any bald person can tell you, by the time we know we're in a recession, aggressive diversionary tactics don't make the economy look better. They usually make it look worse.

Still, Congress is pushing ahead with its ointments and tonics, its stimulants and tax cuts. I'll briefly outline them for you, along with the simple memory devices I use to keep them all straight.

First, there's what I call the Rogaine Recovery Proposal. Named after the rub-on tonic that claims to bring back lost hair, the Republican-backed House plan would give money back to big companies by retroactively repealing the corporate minimum tax.

Another part of the $100 billion tax-cut plan I call the Comb-Over Profits Plank. It would allow companies to hide overseas earnings from Uncle Sam until those profits are sent back to the U.S. Companies with big overseas businesses would act like bald people with comb-overs: Refusing to admit the profits exist, even though everyone else knows they're there.

The Democrats have their not-very-promising elixirs, too.

There's the tax-rebate program for low-income workers. This I think of as the Bad Toupee Policy. Much like last summer's $600 tax rebate checks, it might make the low-income workers feel slightly better. But everyone else would know it isn't really doing the economy any good.

Then there's the Democratic call for at least $20 billion worth of new roads, bridges and other transportation projects. Think of this as the Hair Club for Men Strategy. Its effect is similar to hair plugs: Looks great where the money goes, doesn't do anything for the patches it misses.

Now that we know some of the alternatives, the question before Congress and the nation is which, if any, should we use? To answer this, I will go far beyond my particular authority on the subject of thinning hair. I will turn to University of Chicago business school professor Austan Goolsbee, an expert on the impact of tax cuts on receding economies.

Goolsbee thinks it's too late for congressional action to help the economy recover. The average recession lasts about 11 months, which means this one may be over before Valentine's Day. By then, the Federal Reserve's 10 rate cuts in the last year should be having more of an effect.

"There's no way in a million years Congress can get any fiscal stimulus in place in time" to start a recovery, Goolsbee says. Any action now "is going to stimulate the economy precisely when we don't need fiscal stimulus." A surge of inflation could result.

It's more than a coincidence that all the stimulus proposals reflect the political biases of their sponsors. The Republicans are backing corporate tax cuts. The Democrats are packaging public works and benefits for workers and the poor.

They're standard politics dressed up as a quick response.

Consumer expectations for the economy are rising. Retail sales are not so bad after all. The Fed's cuts have yet to take effect.

Congress should adopt an approach that has worked for balding beings since a Neanderthal first recognized the thin patch atop his thick cranial bones: Do nothing. In the case of this particular economic slowdown, the problem will take care of itself.